Making the decision to file for bankruptcy can be a particularly traumatic experience, but often the greatest source of anxiety is facing the unknown about what comes next. Will you always have this cloud hanging over you? How will you be able to get back on your feet financially? These can be challenging questions to ask, but it can be reassuring to remind yourself that millions have been down the road of bankruptcy before, and they have come out better on the other side of it.
To help quell your doubts, it helps to become familiar with what you can expect after you file for bankruptcy, whether it is Chapter 7 or Chapter 13 bankruptcy.
First, the good news: once you file for bankruptcy the harassing letters and phone calls from debt collectors will stop. For most people who file for bankruptcy, this has been a slowly building burden over the course of a few years that is suddenly lifted off their backs. Filing for bankruptcy can put you back into the driver’s seat when it comes to your finances, and it offers up the chance for a fresh start, albeit with some new challenges.
Your credit score will take a hit when you file for bankruptcy, but for most who are considering bankruptcy, they already have a low credit score, so the impact is negligible. The bankruptcy filing will stay on your credit report for 10 years, and lenders will see you as high risk since you have written off at least some of your debts. It will also be very difficult to obtain a loan or credit card for some period of time, and once you are eligible again, you can expect interest rates and fees that may be considered punishing.
Your immediate goal after filing for bankruptcy is to live like a model citizen when it comes to your finances, which means paying all your bills on time, and building an emergency fund.
While credit cards may have been what caused the financial mess in the first place, you will need to work on reestablishing your credit via credit cards, if you ever want to be eligible for conventional mortgages, auto loans, and the like.
Be wary of any offers for credit cards or loans following your bankruptcy as there are lenders who prey specifically on those who have bad credit scores for the purpose of charging high interest rates, or by offering cards which include steep activation or membership fees.
Instead, after building an emergency fund, you should seek out one or two small, secured credit cards where you place an amount of money into an account which serves as your credit limit. Make payments diligently and you should start getting offers for decent, unsecured cards within about six months to one year.
Within about 2-3 years of filing for bankruptcy, and with good financial practices on your part, you will find that conventional loans may be within reach. And in time, your credit can be stronger than it was before you filed for bankruptcy which means you will start to see more credit available, along with lower interest rates and more favorable terms.
If you are considering filing for bankruptcy in the state of Texas, then you should be sure to contact the Texas bankruptcy lawyers at Fears Nachawati. Having an experienced bankruptcy attorney to turn to can help you decide if filing for bankruptcy really is the best option for your situation and how to go ahead with the process if so.